The world dairy situation remains little changed from the previous circular published in July 2015 as global dairy markets continue to struggle in the face of weak import demand and excess supplies. Milk production during 2015 among major suppliers is estimated to have expanded by 1 percent over the previous year; a sharp correction from the high 4 percent growth registered in 2014. For 2016, low milk prices are expected to restrain growth in milk output, which is forecast to increase modestly by less than 1 percent declining by 640,000 tons in Oceania but offset by projected gains of 2.9 million tons of milk production in the EU, Argentina and the United States.
Although the pace of increasing milk production is forecast to slow, prices for such dairy products as skimmed milk powder (SMP) and whole milk powder (WMP) are expected to remain relatively weak. These products face strong headwinds due to the continuation of the Russian ban on imports of dairy products, the strong dollar, and weak import demand from China. Absent a change in these variables or the onset of unfavorable weather, prices will likely not improve significantly in the first half of 2016.
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Source: USDA